Question

8) Cooke Company incurs $4 per unit of variable selling and administrative expense and $50,000 per month in fixed selling and administrative expense. Of the fixed expense, $12,000 relates to depreciation each month. Selling and administrative expense is paid in the month incurred. During February 2011, Cooke produced 50,000 units and sold 48,000 units. What amount would Cooke include for selling and administrative expense on its February income statement? a. $250,000 b. $238,000 c. $242,000 d. $230,000 9) Letestu Company has a beginning cash balance on January 1, 2011 of $10,000. Cash collected in January is $100,000 and sales revenue in January is $108,000. Expected disbursements for January for inventory purchases are $45,000 and for selling and administrative expenses are $62,000. Additionally, a dividend payment of $5,000 will be made in January. Letestu maintains a minimum cash balance of $5,000. How much cash will Letestu need to borrow in January in order to meet the minimum balance requirement? a. $0 b. $19,000 C. $7,000 d. $17,000

Just need #9 answered.

Answer 1

Answer

· Question #8

February Income Statement will include following cost as Selling & Admin expense:
(48000 units sold x $ 4 variable selling & admin expense) + $ 50000 fixed selling & admin expense
= 192000 + 50000
= $ 242,000

Correct Answer = Option ‘C’ $ 242,000

· Question #9
Correct Answer = Option ‘C’ $ 7000

Beginning - Cash	$10,000
Cash collected	$100,000
Cash available	$110,000
Less: Cash disbursements
Inventory purchase	$45,000
Selling & admin expense	$62,000
Dividend	$5,000
Total disbursements	$112,000
Excess (Deficit) of Cash available over disbursments	($2,000)
Minimum cash balance required	$5,000
Amount to borrowed [ $5000 + 2000]	$7,000